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Covad to Take Earnings Hit

The meltdown of digital-subscriber-line providers continued as Covad
Communications Co. said it would take a $50 million to $100 million charge to
its earnings to cover restructuring charges.

The company had expected those charges to be about $20 million.

In a prepared statement, Covad also said the effect of new accounting
standards would lower its 2000 revenue by $52 million and increase its cash-flow
losses in the period by $17 million.

Covad has been hit hard by the downturn in the DSL market, and it has been
scrambling to right its faltering finances. The company lost $433.5 million in
the first nine months of 2000 on revenue of about $156 million. In 1999, the
company lost $195 million for the year.

The company has been making some drastic changes, dismissing CEO Robert Knowling
in November. His replacement, interim CEO Frank Marshall, has embarked on a plan
to sell off unprofitable assets and to shed about $200 million in costs
annually.

Covad postponed the release of its fourth-quarter earnings after NASDAQ
officials asked for additional information regarding the way it records revenue.
NASDAQ halted trading on the stock until it got its answers.

Although trading resumed by 12:30 p.m. Tuesday, the stock finished down 44
percent, or $1.25 per share, at $1.63 each.